(Guest post by Greg Forster)
Do you enjoy being able to click on a product in Amazon and have it delivered to your door the same day?
Thank Fred Smith, who founded FedEx in 1971 and stepped down from the CEO chair this year.
The benefits Smith’s work have brought to the whole world are far, far greater than what we experience simply by virtue of being able to click on a knickknack and then have it in hand before the Earth has finished a rotation. The explosive economic growth of the modern world, which powers everything from longer lifespans and new medical inventions to the drive toward greater political and social equality at the heart of commercial republics, depends essentially upon transportation. The modern economy does not grow because modern science invents new stuff; people have been inventing new stuff since they were people. The modern economy grows in part because it gives people (at least in principle) enforceable legal rights to property and contract, which gives them social space to unleash their constructive potential. But it also grows because the scope and extent of economic exchange has expanded radically, and we realize huge gains from trade. Better transportation means more trade, which means more growth, and while economic growth does create major new social challenges we didn’t have before, it is on balance one of the best things the world has ever known.
But don’t discount the value of being able to click on a knickknack and then have it in hand before the Earth has finished a rotation! The ability to manage our time more efficiently – to have more flexible and adaptable access to the resources and opportunities we acquire through exchange – is of tremendous value to every one of us. Time is not money, time is value, and value is the only thing that ultimately matters to economic life.
Smith outlined his bold vision in a term paper he wrote for an economics class in college. Tremendous value was being lost because shipping services were not coordinated. The trucker drops it off at the dock and then it sits there until the boat leaves; the boat drops it off on the dock and then it sits there until the other trucker comes to pick it up. An integrated global transportation network could eliminate this colossal waste by tightly coordinating transportation schedules. It might not work for shipments that need special treatment, but for the average home or office sending an average package, it would be a huge improvement.
His professor gave his paper a “C.”
After two tours as a Marine in Vietnam (including the Bronze Star, the Silver Star and two Purple Hearts), Smith came home to realize his dream. In 1971 he incorporated “Federal Express,” partly because he thought the word “Federal” would make customers feel like their shipment was an important part of the national economy (which of course it was), and partly because he hoped to lure the Federal Reserve Bank as a customer. In 1973 the company began operations in Memphis – centrally located, good weather and friendly local airport officials who were willing to make improvements to attract Smith’s business.
But the big opportunity came in 1977, when Congress “deregulated” the airline industry. “Denationalized,” while not technically correct, would be at least somewhat closer to the truth. The upraised hand of cronyism and special favor that had stood in the airport door since humanity first defeated gravity at Kitty Hawk was at last removed.
Smith had, of course, been among those who fought hard for years to get Congress to take this vitally important step. So we owe him that, too.
FedEx snapped up seven jumbo jets of its own, beginning the process by which they would take full ownership of their transportation network, unlocking further efficiencies.
They were listed on NYSE the following year.
Whereupon they launched one of the greatest ad campaigns of all time: “When it absolutely, positively has to be there overnight.”
And the pièce de résistance:
That last one is Al-worthy just by itself.
A 2015 Harvard Business School article on FedEx’s system is titled “The World’s Largest Continuous-Flow Process.” That characterization, as applied to FedEx, may no longer be technically correct. But while Jeff Bezos runs away with all the publicity, it was Fred Smith who really invented the global commercial chain we rely on today.
Giving Fred Smith the Al Copeland Humanitarian of the Year Award is so simple, even Jay Greene can do it!